While bigger may be better when it comes to economies, when it comes to companies it's not necessarily always a good thing. Research has shown that when it comes to stock returns, good things do indeed come in small packages. In a landmark study published in The Journal of Finance , in 1992, two academics, Eugene Fama and Kenneth French studied stock returns since 1926. When they examined capitalization (stock price x number of shares outstanding), the conclusion they reached, was that the average small cap value stock handily outperformed the average large cap stock.

Nowhere is this more evident than with Big Oil. Today, many of our traditional supply basins are starting to decline, with less and less oil coming from these critical lifelines each and every year. In America , the birthplace of the oil era, production peaked at 9.6 million barrels per day in 1970 and volumes have been declining ever since. The Norwegian and U.K. North Sea fields have been diminishing since 1999, and so too has Mexico 's massive Cantarell oil field, which saw its peak production of 3 million barrels per day back in 2003. In 2008, Indonesia was kicked out of OPEC for becoming—of all things—an oil importer.

The search for tomorrow's oil has taken the international oil companies farther and farther afield. New oil discoveries tend to be in remote and often inhospitable environments. BP's Macondo well that gushed oil into the U.S. Gulf of Mexico for almost 100 days, was located 50 miles offshore in the deep shelf. Other areas that hold promise for significant future production include offshore Brazil , but the fields that have been discovered so far lie more than 100 miles offshore. And some estimates for developing Brazil 's two largest offshore fields—the Tupi and Carioca—will cost more than $600 billion.

Escalating costs, smaller reservoirs and increasingly inhospitable host governments have Big Oil running scared. Exxon Mobil Corporation, the world's largest publicly traded oil company, has been scrambling to replace their declining oil reserves after a disastrous foray into Russia and Venezuela . So desperate was Exxon Mobil to bolster its sagging reserve life index (book reserves divided by current production) that it shot the locks off its wallet—spending $41 billion to buy XTO Energy—in a move to gain shale natural gas reserves.

Over the past four years, Exxon has spent more than $154 billion buying back its own stock. But in spite of Exxon's heavy buying of its own stock, the price per share of Exxon Mobil (XOM—NYSE) has barely budged over the last six years! The stock market appears to be a lot less enamored with the company's financial engineering and is still looking for growth of both reserves and production before rewarding Exxon with a higher share price. But with no likely prospects for significantly higher production or reserve growth on the horizon, Exxon shareholders are unlikely to have a spring in their step any time soon.

Like big oil, large pharmaceutical companies have been struggling to grow as the patents on their blockbuster drugs have begun to roll off. With cut throat competition coming from generic drug manufacturers and huge up-front research and development costs, big pharma is struggling to grow.

So bad are the growth prospects for the pharmaceutical companies that in a bold move designed to slash costs, many of the industry's biggest companies have joined forces. In 2009, Pfizer bought its rival Wyeth, spending more than $68 billion in an attempt to grow its revenue base by 50% in the troubled industry and in an attempt to transform it from a pharmaceutical company to a diversified health care company. Last year also saw drug maker Merck & Co. acquire Schering Plough in a $41 billion transaction designed to boost their chances at bringing blockbuster drugs to market.

When it comes to investing, small is beautiful. And while a tug of war exists in the stock market today between the very strong corporate earnings and a muddied picture on US unemployment and home sales, Europe 's economic prospects have seemed more encouraging recently. If Europe can turn the corner and economic growth begins to accelerate, there will plenty of opportunities for investors in the energy and base metal sectors. But for investors to really prosper when global growth gets going, they should focus on the smaller companies who have years of profitable growth ahead of them, rather than focus on their bigger, slower brethren.

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